Nippon Paint Middle East, which is a wholly-owned subsidiary of Nippon Paint India, aims to clock Rs 100 crore in revenue by end-2025 as it increases its market share in the region’s aftermarket and diversifies into newer product categories to cater to more market segments beyond automotive.
The company which participated in the Automechanika Dubai 2023 aftermarket trade fair showcased its automotive refinish products from the paint and non-paint categories, which include Nippon’s N-Force and N-Power brands that house clear coats, primers, and thinners for the aftermarket sector. It also highlighted the Japanese paints major’s Nax 921 and 922 automotive clear coats, which, according to Nippon Paint India, have been very well received in the Middle East market.
“We are making good progress and adding a lot of new customers, as well as gaining more business from this region. From having only a dozen customers when we took charge of Nippon Paint’s Middle East operations in 2021, we have been able to quickly scale the customer base to over 200 customers, including a mix of distributors, retailers, and end-users,” Sharad Malhotra, President, Automotive Refinishes and Wood Coatings, Nippon Paint India, told Autocar Professional, in Dubai.
While Nippon Paint Middle East was incorporated in 2015, its integration into the Nippon Paint India business happened during the peak of Covid in 2020. “We could only start seriously focusing on this market in April 2021, and since then, we have a mandate from the global headquarters in Japan to grow this company and make a mark in this region, which includes markets such as Dubai, Qatar, Oman, Kuwait, Bahrain, and Saudi Arabia,” Malhotra said.
“While we have already begun supplying to some of these destinations from our Middle East base in Dubai, the others are on the verge of commencement,” he added. Nippon Paint Middle East is headquartered in the UAE in Dubai.
“This is the first subsidiary of Nippon Paint India, and our prime focus is to make it successful. Therefore, it is more about making this business sustainable, and at the moment, it is growing at an annual rate of 60 percent. Over the last two years, we have registered a healthy annual growth of 100-200 percent,” Malhotra said.
“We want to see it grow and become bigger, and our ambition is to make it as big as our India business. We aim to become a leader in the UAE market, which is our base market in the Middle East, in the next 3-4 years’ timeframe,” he added.
At present, Nippon Paint India’s Middle East subsidiary contributes in the range of 5-6 percent of its total business, and the company envisions strong growth potential in the Middle East aftermarket. “The six countries in the Middle East offer a US$ 200 million (annual) opportunity in the automotive refinish business, and Nippon Paint aims to tap into a major chunk of that pie. Right now we are very small, but as we scale, we are hopeful of becoming one of the leading players in this region,” Malhotra said optimistically.
“As far as the automotive refinish segment is concerned, I believe this market has the potential to become as big as India, if not bigger,” he added.
AFRICA MARKET ON THE GROWTH RADAR
Beyond the Middle East, Nippon Paint India is also looking to spread its reach to Central Asia, Europe, and Africa, particularly East Africa. “Africa itself is a huge market, albeit it is very scattered and comprises around 50-odd countries. But to begin with, we are setting up another subsidiary in Kenya next month, and will start supplying to East Africa regions. Overall, we see a market opportunity of US$ 500 million from the Africa market,” he added.
The company says it is bullish about investing into this subsidiary, and will not remain restricted to pre-defined budgets. “As the opportunity develops, the market expands, and we are able to garner a better share of the market, there is no limit to the investments that we can make. We are a cash-rich company, and we believe we will put the cash in the right place to get the best return to our investors and shareholders,” pointed out Malhotra.
“We are doubling our resources and have recently set up a second office in Dubai. While we earlier had just one office in the Free Zone, we have recently commissioned a new mainland office, which allows us to cater to the local market in a better way,” he said. The company is also planning diversification of its product lines, and is getting into newer categories such as industrial paints and wood coatings – both of which are also its core domains in India – which is currently serving as the manufacturing base for its products on offer in the Middle East.
While the paint technology is being driven by Japan, where the specific solutions are being developed as per market requirements, Nippon Paint India’s Chennai facility is producing and shipping the automotive refinish products to the company’s Middle East entity.
“We are also looking at investing into a local manufacturing facility in the Middle East. With our teams, warehouses, customers, and relationships having developed here, we are now a part of this ecosystem. Therefore, it is going to be relatively easy,” Malhotra said.
MIDDLE EAST MARKET VERY PRICE-COMPETITIVE
With its India business clocking Rs 480 crore in FY2023, Nippon Paint India is finding the Middle East a tough battle on the price wars. “While India is also a cut-throat market, it is a different kind of challenge in the Middle East. Here, our main competition is with the distributors, who only know how to fight on price. But, we have the knowledge, experience, skills, and products, which arm us to be in an advantageous position.
“Our key differentiator is that unlike other global brands, which are relying more on local distributors, we are the only ones who have really invested in human resources here. On the other hand, if we are competing with a local Middle East manufacturer, we are far superior in terms of technology. Therefore, depending upon who our competition is, we are well placed in terms of technology as well as having our own resources,” Malhotra explained. Nippon Paint’s chief competitors in the Middle East aftermarket include global paint specialists such as PPG, AkzoNobel, and Axalta.
“Initially, our entire focus was to ensure the products we launch here are appropriate for the market. That is where we put in a lot of effort in understanding the market requirements, and bringing tailor-made solutions,” he added.
The company states that as it eyes Rs 1,000 crore mark for its India operations in the automotive refinish business in the coming years, it is aiming to ramp up revenues of its Middle East subsidiary as well. And, growing its customer base remains an important part of that strategy.
“We are currently focusing on the customer base, and the Dubai Automechanika is a huge opportunity for us to grow our customer base. Participating in this event, which is attracting people from all across the world including markets like Europe. Participating here is a big shout from us and is the announcement of our arrival. We have now come of age, and all the products that we sell here are made in India,” Malhotra said.
“Certain product lines like the Nax 921 and 922, whose sales have picked up in these markets, are helping in the better capacity utilisation of the Nippon Paint India plant,” he added.
The company says that sustainability is an important aspect, particularly with customers in the Middle East, having high expectations in this regard. According to Alpansh Sharma, General Manager, Nippon Paint Middle East, “While we have begun supplies with our solvent products, going forward, we aim to introduce water-based paint and non-paint products as well because these markets are more environmentally conscious. We will introduce these sustainable products from 2024.
“The Rs 100 crore milestone will give us a hold of around 15-20 percent share of the Middle East aftermarket,” Sharma concluded.